Billions Lent to Russia by Western Banks

Russian oligarchs, corporations and banks have been borrowing heavily from banks in the West, which underscores risks on both sides in the growing crisis in Ukraine.

According to the central bank in Russia, the total amount of foreign debt was $732 billion on December 31, 2013, which was up nearly $200 billion over the past two years. Of that $200 billion, $160 billion was new money borrowed by Russian banks and businesses.

During this week Metalloinvest, the mining giant, said it arranged for a $1.15 billion financing facility for exporting with banks including three of the largest in France, Deutsche Bank, ING of the Netherlands and UniCredit of Italy along with Bank of Tokyo Mitsubishi and Credit Suisse.

Alisher Usmanov controls Metalloinvest. He is reported to be the richest man in Russia and close to President Vladimir Putin.

Leaders in the European Union will meet Thursday to consider ways to increase pressure on President Putin over the annexation by Russia of Crimea the southern region of Ukraine.

Those same leaders will meet next week with President Obama to further discuss the situation.

Europe and the U.S. said Russia violated the sovereignty of Ukraine and released the names of 28 officials, which includes some senior politicians in Russia who have been banned from travel and had assets frozen.

However, leaders in the EU will likely tread softly prior to imposing any serious sanctions, which could cause damage on each side. Russia and Europe have had close trade ties as well as investment ties that total over $500 billion annually.

The economy in Russia has slowed dramatically over the past year and might not grow during 2014 due to the Ukraine crisis some analysts warned.

The risks lenders have loaning to Russia are rising already due to the deteriorating outlook economically. If the crisis were to get worse, banks in Europe could lose much more than their counterparts in the U.S.

Data shows that lending by European banks to Russia as of September 30, 2013 was over $183 billion or roughly 0.4% of the banking industry total assets. The exposure in the U.S. was only $37 billion or only 0.25% of their total assets.

French banks in Europe have lent more than any others with over $51 billion, with Italy second at $29 billion, followed by Germany with $24 billion, the UK with $19 billion and the Netherlands with $18 billion.